State agencies will have about $33 million less in the next fiscal year for nonessential services and programs under new spending restrictions being implemented by Gov. Linda Lingle.

Feeling the pinch

Gov. Linda Lingle has implemented a 4 percent restriction on non-essential spending for all state departments. According to the state Department of Budget and Finance, the departments most affected include:

Education:
$8.5 million
Health:
$4.4 million
University of Hawaii:
$3.9 million
Human Services:
$3.5 million
Accounting & General Services: $2.5 million

Lingle, in a memo to department heads this week, said the restrictions were needed because of slower tax collections and a "softening economy."

"The restrictive policies for FY '09 are the first step in managing the changes brought about by a new fiscal environment," Lingle stated in the memo sent Monday. "As we look toward the next round of budget preparation for fiscal biennium 2009-11, we can expect the continuation of this cautionary stance plus other fiscal measures that are necessary to safeguard the state's general fund."

The biggest restriction, $8.5 million, is to the Department of Education, which has the largest budget of any state department. The Department of Health was next at $4.4 million.

Restrictions apply only to discretionary, or nonessential, spending, and residents should not expect any impact to essential government services, said state Budget Director Georgina Kawamura.

She noted that her agency has been in talks with department heads about the potential restrictions, so the memo should not come as a surprise.

"I don't think there's cause for anyone to panic," she said. "Our directors are well aware of the delivery of public service that's being counted on with regard to our communities and those kinds of things."

The 2009 fiscal year starts Tuesday.

At the close of the 2008 session, lawmakers passed a supplemental budget for the upcoming fiscal year that trimmed $44 million from the $5.3 billion operating budget passed a year ago.

Lawmakers cited the slowing of the state's economy and bleak forecasts from noted economists.

Their budget anticipated revenue growth of about 3.5 percent in the current fiscal year. Weeks after the session ended, the state Council on Revenues -- which sets the forecast upon which the state budget is based -- predicted growth of only 3.3 percent.

Rep. Marcus Oshiro, House Finance Committee chairman, said he was pleased to see Lingle's recognition of current revenue trends.

"I am happy that the Lingle-Aiona administration finally decided to take off the rose-colored glasses and honestly report what's going on in the local and national economy," said Oshiro (D, Wahiawa-Poamoho).

Oshiro was referring to a speech Lingle gave on April 25 -- the same day lawmakers completed work on all bills -- in which she painted an upbeat picture of the state's economy following recent airline shutdowns and the closing of Molokai Ranch.

Speaking to the Hawaii Economic Association, Lingle blamed the media for highlighting negative stories about the nation's economic woes and contended that Hawaii's economy is not so bleak.

In her latest memo, Lingle urged departments to accelerate construction projects to invest in long-overdue repairs and upgrades to public facilities, while also promoting construction activity to stimulate the economy.

Oshiro said he is hopeful the new memo indicates a willingness to work with the Legislature to address budget shortfalls that may occur in upcoming years.

"We'll be going through a re-prioritization of what we consider essential government services -- both in scope and scale -- and look at where we may have to make some hard decisions and may have to make some cuts," Oshiro said.